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Transocean Raises Acquisition Offer for Transocean Partners


Recently, offshore drilling giant Transocean Ltd. RIG and Transocean Partners LLC RIGP jointly announced the increase of shareholding by the former to 1.2 shares from 1.1427 shares – the consideration for its pending merger of each common unit of the latter that it does not already own.

Transocean made this announcement post the failure to receive 50.1% shareholder votes necessary for the merger to close. The company aims to issue around 23.8 million shares for the deal to complete.

For the merger to take place, approval from the holders of Transocean Partners` common units is required. Shareholders of Transocean have voted for roughly 21.3 million common units in support of the transaction. However, a vote in favor of the deal by nearly 9.9 million of 19.7 million common units not held by Transocean is still needed for the deal to close. The transaction is expected to close by next month, subject to customary closing conditions.

Switzerland-based Transocean is the world’s largest offshore drilling contractor and leading provider of drilling management services. The company offers unmatched levels of earnings and cash flow visibility, which is supported by its technologically advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power.

However, the persistent weakness in oil prices has significantly hurt Transocean's business. Also, with large, multinational energy firms looking to reign in their skyrocketing capital expenses, the drilling space is witnessing intense competition as multiple firms chase a single contract. This excess capacity, in turn, could lead to further lowering of utilization or dayrates.


Hence, Transocean currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Zacks Rank and Key Picks

Transocean currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector include Ultra Petroleum Corp. UPLMQ and McDermott International Inc. MDR. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.

Ultra Petroleum, on the other hand, posted an average positive earnings surprise of 65.91% in the last four quarters.

In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.

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